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India is likely to hit its fiscal deficit target of 5.3 percent despite a significant shortfall in revenue, a government report said on Wednesday, a day before Finance Minister P. Chidambaram unveils what is expected to be the most austere budget in years.

The Economic Survey 2013 annual report on challenges facing the economy was prepared by Raghuram Rajan, a former chief economist to the International Monetary Fund (IMF) who became the top adviser in the finance ministry last year.

Rajan had previously said that 5.3 percent was a "tough" deficit target for fiscal 2012/13 (April-March).

The report said prioritising expenditure and raising the tax-to-GDP ratio were key to medium-term fiscal consolidation. Chidambaram has vowed to bring the deficit down to 4.8 percent in the fiscal year that begins in April.

A deficit of 5.3 percent of GDP would remain the widest spending gap among the BRICS group of major emerging nations, which also includes Brazil, Russia, China and South Africa.

It makes credit expensive for the private sector and is the prime reason for threats by ratings agencies Standard & Poor's and Fitch to downgrade India's sovereign credit rating to 'junk' status.

The report also forecast the economy will grow 6.1-6.7 percent in 2013/14, well above a rate of 5.0 percent it expected this fiscal year.